The past decade was the worst for the U.S. economy in modern times, a sharp reversal from a long period of prosperity that is leading economists and policymakers to fundamentally rethink the underpinnings of the nation’s growth.

It was, according to a wide range of data, a lost decade for American workers. The decade began in a moment of triumphalism — there was a current of thought among economists in 1999 that recessions were a thing of the past. By the end, there were two, bookends to a debt-driven expansion that was neither robust nor sustainable.

There has been zero net job creation since December 1999. No previous decade going back to the 1940s had job growth of less than 20 percent. Economic output rose at its slowest rate of any decade since the 1930s as well.

•Weak job growth. Many U.S. jobs will continue to move overseas or be replaced by automation. The government estimates that an additional 1.2 million manufacturing jobs will vanish by 2018, on top of the 2.1 million factory jobs lost since the recession started in December 2007. Former Labor secretary Robert Reich says that even when the economy recovers, most of the jobs created won’t be very good ones. The federal Bureau of Labor Statistics (BLS), by comparison, is upbeat. The agency expects the economy to generate 15.3 million jobs from 2008 to 2018. And it forecasts 5.1% unemployment in 2018.

•Weak consumer spending. Consumers, who account for about two-thirds of U.S. economic activity, are exhausted after the binge of the past decade fueled by credit cards and home equity loans. The BLS expects consumer spending to grow 2.5% a year from 2008 to 2018, down from 3% in the previous decade.

•Weak economic growth. Daniel Stelter of Boston Consulting Group sees an economy in a bind: Old industries, such as autos and steel, are declining, and new ones, such as solar energy and biotechnology, won’t soon generate lots of jobs.

With typical recessions, employment comes roaring back after eight or nine months. Based on our research, we’re not going to see it improve sharply until 2011. So, if you’re looking for a job, it’s going to feel like a recession for much of 2010…

We may never get back to a national unemployment rate below 5 percent. Unemployment is going to be at least 7 percent, maybe 8, deep into 2011. It’s going to take several years to see unemployment settle at 6 percent.

We’ll have to adjust to this situation, because it isn’t going to change overnight. We’re going to have higher inflation, higher taxes, and slower growth.

Stocks have experienced a virtually uninterrupted ascent since hitting their lows last March, and we know that stocks don’t move in a straight line. They didn’t during the 1930s or earlier this decade, the last time we experienced such sharp rallies after a crash. I expect at least one correction of 10% or more this year, which will represent a buying opportunity.

Consumers are redefining value to take more careful account of not only what a product or service costs, but what importance it occupies for them and their families. The next new designer handbag is out. Quality, durability, use value, and credible convenience are in. They are also increasingly concerned in the look and feel and character of companies that they buy from.

This is a permanent change – as great a change as we have seen in 50 years. I am rethinking almost all of my own spending habits. There is an abiding satisfaction in realizing that more – of many goods and services – is not necessarily better. And I am settling into a layaway frame of mind: Let me save up the money to buy some great boots.

During the good years of the last decade, such as they were, growth was driven by a housing boom and a consumer spending surge. Neither is coming back. There can’t be a new housing boom while the nation is still strewn with vacant houses and apartments left behind by the previous boom, and consumers — who are $11 trillion poorer than they were before the housing bust — are in no position to return to the buy-now-save-never habits of yore.

Most important would be for the federal government to step up its spending for infrastructure, basic research, clean-energy development and expanded public higher education. After 20 years of badly underfunding public investment, the first stimulus package was a step in the right direction. A second package would create additional high-paying jobs now, while generating higher growth and tax revenues for decades. A boost in government investment would also provide the perfect political cover for moving aggressively to reduce the government’s “consumption” spending by reforming entitlements, reducing farm subsidies and business tax breaks, and eliminating underperforming social and military programs.

Given how we got into this mess, we’re probably stuck with several more years of slow growth in jobs and income. The only important question is whether we’ll use this opportunity to lay the foundation for another generation of sustained prosperity, or get sidetracked by chasing after short-term stimulus and overzealous deficit reduction.

We’re not going to have a second wave of financial crisis. We’ll do what is necessary to prevent that. We cannot afford to let the country live again with a risk that we’re going to have another series of events like we had last year. That’s not something that’s acceptable.

The American consumer, who selflessly provided so much of the demand in the previous boom, will surely keep her hands mostly in her pockets in 2010: American family balance-sheets are weighed down with debt and there is the spectre of still-rising unemployment. By the end of the crunch as many as 25m people may have lost their jobs in the rich OECD countries: unemployment rates of “one in ten” could be the norm. In continental Europe personal debts are relatively low, but the banks look sickly. Japan, worn out by years of deflation, hardly seems ready to lead the way.

Indeed, Japan serves as a warning: it takes a long time to recover from balance-sheet recessions, and policymakers have to pull off some difficult tricks. Fighting deflation first, but keeping an eye on inflation; cleansing the banks rapidly, but keeping credit lines open; providing fiscal stimulus, but spelling out a way to cut public debts. Do all these things well and the recovery could be more v-shaped; get them wrong and a w soon appears.